Commodities have been sinking like stones since late February, an unusual divergence from the rallying stock markets. This relentless weakness has wreaked havoc on commodities sentiment, leading traders to abandon commodities stocks.
To paraphrase the great Steve Martin, today’s investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly what’s happened in gold and global markets in recent weeks.
Silver prices have been boosted by investment and industrial demand this year, the Silver Institute has reported. Sturdy investment demand has pushed the silver price up 20% in the first ten weeks of 2012.
China's slowest pace of growth in over two years prompted a rally in commodities as speculators turned bullish on the idea that the country's central bank will now take easing steps in order to get growth back above the fourth quarter's 8.9% level.
Spot metals dealings opened with losses in New York this morning as the decline in oil and concurrent rise in US currency helped shape the trading patterns. Gold started with a decline of $7.10 per ounce and was quoted at $1,532.90 on the bid-side.
Gold and silver have extended their recovery and may be headed for the fourth day of gains due to the continuing European sovereign debt crisis, Chinese inflation and the risk that rising commodity prices bring inflation and stagflation.
Silver's nearly 3% surge in trading in Asia may indicate that the long expected short squeeze may be underway. Bullion banks with large concentrated short positions may be being forced to buy back their short positions - propelling silver higher.